Dentsu, the massive but not well known Japanese ad agency holding company, will acquire Aegis, a European advertising giant, in a $4.9 billion deal, according to Ad Age.A sale of Aegis was predicted by Business Insider in April.
The move combines Dentsu’s $3.4 billion revenue network with Aegis’ $1.69 billion in revenue.
Dentsu owns American agencies like McGarryBowen, Attik, Firstborn, Innovation Interactive and its 360i unit. Aegis owns a bunch of media buying agencies like Carat and the legally troubled billboard network Posterscope, whose president and finance director were recently charged with accounting fraud.
Here are the main effects of the deal on the agency landscape:
- It will envelope the smaller Aegis—which reports under financially murky British disclosure rules—into the even murkier Japanese financial disclosure environment. That will make it harder to gauge the level of wrongdoing inside Aegis, which has a well-documented history of corruption and unpaid bills from clients. (Its former president, Aleksander Ruzicka, was charged with embezzling 30 million euros’ worth of client Danone’s media credits).
- It leaves in place Aegis CEO Jerry Buhlmann’s management team, according to Age. Buhlmann was brought in to wipe Aegis’ slate clean after the Ruzicka mess, but he arrived to discover the Posterscope fiasco—in which the unit’s American bosses, Todd Hansen and James Buckley, are accused of booking $20 million in fictional revenues. Buhlmann now doubtless knows where the Posterscope bodies are buried, and it will be easier to keep them hidden behind Denstu’s larger walls where the numbers are less likely to be material to the greater company’s accounts.
- It bails out Aegis investor Vincent Bollore, one of France’s most prominent businessmen, by giving him a 48 per cent premium on his 30% stake in the company, at 240p/share. Bollore has held stock in Aegis since the mid 2000s.*
- It puts a huge amount of pressure on Havas, which booked $1.9 billion in revenue last year, as the next acquisition target. Bollore also has a stake in Havas. Lo and behold, Havas opened with a sharp jump, up 5% to ~3.90 euros/share, indicating that investors may believe Bollore can engineer the sale of this now-underpowered agency network. A spokesperson for Havas, however, insisted categorically that Havas is not for sale.
- Further evidence for the impending sale of Havas—in my opinon—is CEO David Jones’ decision to rebrand its most famous worldwide ad agency, Euro RSCG, with the Havas Worldwide parent company name. Within the agency world, this is a baffling move—everyone knows Euro RSCG, it’s one of the business’s most venerable brands. But if Havas is positioning itself as an acquisition target then simplifying its brands (by having them all use the same name) could make the network easier to understand as a financial beast. Remember, it is the bankers, accountants and lawyers who engineer these deals, not the creative directors and client services folks whose work creates their value. (For the record, Havas says the rebranding is to simplify its agency offerings in a way that makes the network distinctive from the other holding companies, which often approach clients with long lists of different agency brands.)
*Correction: Ooops! This article originally stated incorrectly the timeframe of Bollore’s ownership of stock in Aegis and Havas. Apologies!
- ON THE BLOCK: 4 Of 7 Major Ad Agency Networks Are Now Acquisition Targets
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